LCD: Korea’s New Top Electronics Industry

Samsung Electronics’ annual consolidated sales, including overseas sales, reached 103.4 billion dollars (97.196 trillion won) last year, exceeding the 100 billion dollar mark for the first time in its history.

On a parent-level basis, sales posted a record high of 17.48 trillion won in the fourth quarter while annual sales in 2007 set a record high of 63.18 trillion won. However, its operating profit decreased 14 percent year-on-year, continuing to fall for the third consecutive year.

By division, operating profit of the liquid crystal display (LCD) division for the first time surpassed that of the semiconductor division. It seems LCDs are highly likely to emerge as Korea’s main electronics industry.

○ Growing sales but weakening profitability

Samsung Electronics said yesterday it became one of the world’s top three electronics firms, following German-based Siemens and U.S.-based HP, since its sales broke the 100 billion dollar mark last year.

Moreover, the company set a new record in annual consolidated sales, and quarterly and annual sales on a parent-level basis. The consolidated operating profit of the firm’s LCD sector reached 2.11 trillion won, exceeding 2 trillion won for the first time while that of the firm’s digital media sector totaled 1.06 trillion won, surpassing 1 trillion won also for the first time.

However, its operating profit (both consolidated and parent-level) was worse-than-expected due to poor performance in the semiconductor business.

Samsung Electronics’ fourth-quarter and 2007 operating profits both fell 14 percent, posting 1.78 trillion won and 5.94 trillion won, respectively.

As the semiconductor division suffered from a sharp drop in price for DRAM memory, fourth quarter sales fell 2 percent quarter-on-quarter and operating profit nosedived 53 percent quarter-on-quarter.

The nation’s largest electronics firm explained that its operating profit level was good relative to overseas competitors.

Samsung Vice President Ju Wu-sik, Head of IR, said, “By sales, we have become the world’s third largest firm in the electrical and electronics sector. But, we are ahead of the two front-runners--Siemens and HP--in terms of profits. We’ll become a true number one electronics firm with sales of 130 billion dollars next year.”

Vice President Ju suggested that Samsung Electronics plans to make a further aggressive investment regardless of deteriorating market conditions, saying, “We invested 11 trillion won in 2007. This year, we’ll also invest more than 11 trillion won while investing 7 trillion won in the semiconductor sector and 3 trillion won in the LCD sector.”

○ Rapidly rising LCD sector

While the semiconductor sector has slackened, LCD has rapidly emerged as the representative business sector for Korea’s electronics industry.

The operating profit of Samsung Electronics’ LCD division increased 37 percent quarter-on-quarter to 920 billion won in the fourth quarter, exceeding for the first time its semiconductor business, which posted 430 billion won.

The company’s LCD division has become one of the most profitable, along with information and communications division, which posted an operating profit of 580 billion won over the same period.

Earlier on Monday, LG Philips LCD also announced that its fourth quarter sales and operating profit reached 4.322 trillion won and 869 billion won, respectively.

Boosted by the better-than-expected performance, shares of Samsung Electronics increased 7,000 won or 1.33 percent to close at 532,000 won/share on Tuesday.

nex@donga.com